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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Maxim Pharmaceuticals, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
/ / Fee paid previously with preliminary materials
- -------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ____________________________________________
(2) Form, Schedule or Registration Statement No.: ______________________
(3) Filing Party: ______________________________________________________
(4) Date Filed: ________________________________________________________
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January 12, 1998
Dear Stockholder:
On behalf of the Board of Directors and management of Maxim
Pharmaceuticals, Inc., I invite you to our Annual Meeting to be held on Friday,
February 20, 1998, 2:00 p.m. EST at The American Stock Exchange, Board of
Governors Room, 13(th) Floor, 86 Trinity Place, New York, New York.
At the meeting we will highlight the recent progress made in advancing the
commercialization of MAXAMINE-TM-, our immunotherapeutic for cancer and
infectious diseases. We will also share our vision and plans for continuing
the rapid development of your company in the upcoming year. We hope that it
will be possible for many of you to attend in person.
It is important to us that your shares be represented at the Annual
Meeting whether or not you plan to attend. You can ensure that your shares are
voted at the Annual Meeting in accordance with your preferences by properly
completing, signing and returning your proxy card in the enclosed envelope as
soon as possible.
We also invite those of you in Europe unable to attend the Annual Meeting
to attend a management update meeting to be held Monday, February 23, 1998,
3:00 p.m. Swedish Time, at the Stockholm Stock Exchange Hall,
Kallargrand 2, Stockholm, Sweden. If you plan to attend the European
management update meeting you must still return your proxy card in advance of
the Annual Meeting to ensure that your shares are voted at the Annual Meeting.
Thank you for your continuing interest and support.
Sincerely,
/s/ Larry G. Stambaugh
Larry G. Stambaugh
Chairman of the Board
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MAXIM PHARMACEUTICALS, INC.
10835 ALTMAN ROW, SUITE 150
SAN DIEGO, CALIFORNIA 92121
(619) 453-4040
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 20, 1998
To the Stockholders of Maxim Pharmaceuticals, Inc.:
The Annual Meeting of the Stockholders of Maxim Pharmaceuticals, Inc. will
be held Friday, February 20, 1998, 2:00 p.m. EST at The American Stock
Exchange, Board of Governors Room, 13(th) Floor, 86 Trinity Place, New York, New
York, for the following purposes as are more fully described in the
accompanying Proxy Statement:
1. To elect two Directors to the Board of Directors to hold office for a
three-year term or until their successors are elected and qualified.
The following persons are nominees for election to the Board of
Directors by holders of the Common Stock: Mr. Per-Olof Martensson and
Mr. Larry G. Stambaugh;
2. To consider and act upon a proposal to approve an amendment to the
Company's 1993 Long-Term Incentive Plan (the "Incentive Plan") to
increase the aggregate number of shares of Common Stock authorized for
issuance under the Incentive Plan from a total of 1,000,000 shares to
1,300,000 shares;
3. To consider and act upon a proposal to ratify the initial selection
of KPMG Peat Marwick LLP as the Company's independent public
accountants for the fiscal year ending September 30, 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on January 2, 1998, are
entitled to vote at the Annual Meeting or any adjournment, postponement or
continuation thereof.
To assure that your shares will be voted at the meeting, you are requested
to complete, date and sign the enclosed proxy card and return it promptly in
the enclosed, postage-paid, addressed envelope. No additional postage is
required if mailed in the United States. If you attend the meeting, you may
revoke your proxy and vote in person on all matters submitted at the meeting
even though you have previously mailed your proxy card. Please note, however,
that if your shares are held of record by a broker, bank or other nominee and
you wish to vote at the Annual Meeting, you must obtain from the record holder
a proxy issued in your name.
By order of the Board of Directors,
/s/ Dale A. Sander
Dale A. Sander
Secretary
San Diego, California
January 12, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. YOUR VOTE
IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE EXECUTE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
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MAXIM PHARMACEUTICALS, INC.
10835 ALTMAN ROW, SUITE 150
SAN DIEGO, CALIFORNIA 92121
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 20, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Maxim Pharmaceuticals, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on February 20, 1998, at
2:00 p.m., EST (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at The American Stock
Exchange, Board of Governors Room, 86 Trinity Place, New York, New York. The
Company intends to mail this proxy statement and accompanying proxy card on or
about January 12, 1998 to all stockholders entitled to vote at the Annual
Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, facsimile,
telegram or personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be paid to
directors, officers or other regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
January 2, 1998 will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on January 2, 1998, the Company had
outstanding and entitled to vote 9,239,052 shares of Common Stock. Each holder
of record of Common Stock on such date will be entitled to one vote for each
share held on all matters to be voted upon at the Annual Meeting. All votes
will be tabulated by the inspector of election appointed for the meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes. Abstentions will be counted towards the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 10835
Altman Row, Suite 150, San Diego, California 92121, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
no later than September 14, 1998 in order to be included in the proxy statement
and proxy relating to that Annual Meeting. Stockholders are also advised to
review the Company's Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director nominations.
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PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation and Bylaws provide
that the Board of Directors shall be divided into three classes, each class
consisting of one or two directors, with each class having a three-year term.
Vacancies on the Board may be filled only by persons elected by a majority of
the remaining directors. A director elected by the Board to fill a vacancy
(including a vacancy created by an increase in the Board of Directors) shall
serve for the remainder of the full term of the class of directors in which the
vacancy occurred and until such director's successor is elected and qualified.
The Board of Directors is presently composed of five members. There are
two directors in the class whose term of office expires in 1998. Each of the
nominees for election to this class is currently a director of the Company who
was previously elected by the stockholders. If elected at the Annual Meeting,
each of the nominees would serve until the 2001 annual meeting and until his
successor is elected and has qualified, or until such director's earlier death,
resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting. Shares represented
by executed proxies will be voted, if authority to do so is not withheld, for
the election of two nominees named below. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such
shares will be voted for the election of such substitute nominee as management
may propose. Each person nominated for election has agreed to serve if
elected, and management has no reason to believe that any nominee will be
unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING
PER-OLOF MARTENSSON: Mr. Martensson, age 60, has served as a director of
the Company from 1993 to 1995 and again beginning in 1996. Since 1990,
Mr. Martensson has owned and operated POM Advisory Services AB, an independent
consulting firm. Since 1997, Mr. Martensson has served as Chairman of the
Board of Karo Bio AB, a pharmaceutical company, and from 1991 to 1997 he served
as its President and Chief Executive Officer. From 1992 to 1995, Mr. Martensson
served as Chairman of Skandigen AB, a diversified investment company. From
1987 to 1990, Mr. Martensson served as President of Pharmacia LEO Therapeutics
AB, and as Executive Vice President of Pharmacia AB, both biopharmaceutical
companies. From 1985 to 1990, Mr. Martensson served as President and Chief
Executive Officer of AB LEO, a biopharmaceutical company. Mr. Martensson is
also a director of Gambro AB, AB Eleata and Nobel BioCare AB. Mr. Martensson
is a shareholder and a former director of MediGlobe AB, a corporation that has
recently filed for bankruptcy in Sweden. Mr. Martensson received an M.S. in
Pharmacy from The Royal Institute of Pharmaceutical Sciences (Kungliga
Farmacevtiska Institutet) in Stockholm, Sweden.
LARRY G. STAMBAUGH: Mr. Stambaugh, age 50, has served as the Company's
Chairman of the Board of Directors, President and Chief Executive Officer since
1993. From 1989 to 1992, Mr. Stambaugh served in a number of positions at ABC
Laboratories, Inc., an international contract science research laboratory,
including Chairman of the Board of Directors, President and Chief Executive
Officer. From 1983 to 1989, Mr. Stambaugh served as Executive Vice President
and Chief Financial Officer of CNB Financial Corporation, a multi-bank holding
company. Mr. Stambaugh received a B.A. in business administration from
Washburn University and is a certified public accountant.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
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DIRECTOR CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
COLIN B. BIER, PH.D.: Dr. Bier, age 52, has served as a director of the
Company since 1994. Dr. Bier has served as Managing Director of ABA
BioResearch, an independent bioregulatory affairs consulting firm, since 1988.
Dr. Bier is also a director of Boston Life Sciences, Inc., BioChem Vaccins, a
subsidiary of BioChem Pharmaceuticals, NYMOX Pharmaceuticals Corporation,
Receptagen Corp. and Sparta Pharmaceuticals, Inc.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
G. STEVEN BURRILL: Mr. Burrill, age 53, has served as a director of the
Company since 1996. He founded and has served as Chief Executive Officer of
Burrill & Company, a private merchant bank, since January 1997, and its
predecessor firm, Burrill & Craves, since 1994. Prior to that, Mr. Burrill
served for 28 years with Ernst & Young LLP as a partner and as chairman of the
firm's Manufacturing/High Technology Industry Services Group. Mr. Burrill is
also a director of Axis Genetics plc, Advanced Bioresearch Associates, DepoMed,
Inc., Genitope Corporation, Hambro Health International, NuGene Technologies,
Promega Corporation and UltraOrtho, Inc.
F. DUWAINE TOWNSEN: Mr. Townsen, age 64, has served as a director of the
Company since 1993. Mr. Townsen has served as a Managing Partner of Ventana
Growth Funds, a group of five venture capital funds, since 1983. Prior to
that, Mr. Townsen served as Chairman of the Board of Directors and Chief
Executive Officer of Kay Laboratories, Inc., a manufacturer of medical
products. Mr. Townsen is a certified public accountant. Mr. Townsen is also a
director of Cymer, Inc.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1997, the Board of Directors
held ten meetings. The Board has an Audit Committee, a Compensation Committee,
a Nominating Committee and a Technology Committee which all operate
independently of the Company's management.
The Audit Committee, composed solely of outside directors, meets at least
annually with the Company's independent auditors to, among other things, review
the results and scope of the annual audit and discuss the Company's financial
statements and receive and consider comments as to controls, adequacy of staff
and management performance and procedures in connection with audit and
financial controls. The Audit Committee also makes recommendations to the
Board regarding the retention of independent auditors. The Audit Committee is
currently composed of Mr. Townsen, Dr. Bier and Mr. Burrill. It met two times
during the fiscal year ended September 30, 1997.
The Compensation Committee, composed solely of outside directors, makes
recommendations concerning salaries and incentive compensation, administers and
awards stock options to employees and consultants under the Company's equity
incentive plans and otherwise determines compensation levels and performs such
other functions regarding compensation as the Board may delegate. The
Compensation Committee is currently composed of Messrs. Burrill, Martensson and
Townsen. It met one time during the fiscal year ended September 30, 1997.
The Nominating Committee interviews, evaluates, nominates and recommends
individuals for membership on the Company's Board of Directors and committees
thereof and nominates specific individuals to be elected as officers of the
Company by the Board of Directors. No procedure has been established for the
consideration of nominees recommended by stockholders. The Nominating
Committee is currently composed of Messrs. Stambaugh, Burrill and Martensson.
This committee did not meet during the fiscal year ended September 30, 1997.
The Technology Committee meets with management to evaluate and make
recommendations regarding the progress of the Company's technologies and
product development activities. The Technology Committee is currently
comprised of Mr. Martensson and Dr. Bier. It met three times during the fiscal
year ended September 30, 1997.
During the fiscal year ended September 30, 1997, each Board member
attended 75% or more of the aggregate of the meetings of the Board and of the
committees on which he served, held during the period for which he was a
director or committee member, respectively.
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PROPOSAL 2
APPROVAL OF 1993 LONG-TERM INCENTIVE PLAN, AS AMENDED
The Company's 1993 Long-Term Incentive Plan (the "Incentive Plan") was
adopted by the Board of Directors in 1993. The Incentive Plan was amended
and restated by the Board of Directors in March 1996 and December 1996 and
subsequently approved by the Company's stockholders in April 1996 and
February 1997, respectively. A total of 1,000,000 shares of Common Stock
have been reserved for issuance under the Incentive Plan. As of January 12,
1998, 41,549 shares had been issued upon the exercise of stock awards granted
under the Incentive Plan, 838,249 shares were subject to outstanding stock
options and 120,202 shares remained available for future grants. During the
fiscal year ended September 30, 1997, under the Incentive Plan, the Company
granted to all current executive officers as a group options to purchase
181,666 shares at exercise prices of $8.875 to $14.50 per share, to all
employees (excluding executive officers) as a group options to purchase
55,000 shares at exercise prices of $7.00 to $14.50 per share and to all
current directors who are not officers as a group options to purchase 10,000
shares at an exercise price of $8.875 per share.
In December 1997, the Board approved an amendment to the Incentive Plan,
subject to stockholder approval, to increase the aggregate number of shares
authorized for issuance under the Incentive Plan from a total of 1,000,000
shares to 1,300,000 shares. The Board adopted this amendment to ensure that
the Company can continue to grant stock options, awards, bonuses or rights to
employees of and consultants to the Company at levels determined appropriate
by the Board and the Compensation Committee. During the past year the
Company has experienced rapid growth due to the expansion of MAXAMINE
THERAPY-TM- clinical trial activities and other commercialization efforts,
and these activities have required the recruitment of experienced management,
staff and consultants; such growth and expansion is expected to continue for
the next several years. Management and the Board believe that the use of
stock options as incentive compensation is particularly important to the
Company during the current period of expansion to recruit and retain
qualified persons.
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the Annual Meeting
will be required to approve the Incentive Plan, as amended. Abstentions will
be counted toward the tabulation of votes cast on this proposal and will have
the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether this
matter is approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the Incentive Plan are outlined below.
GENERAL
The Incentive Plan provides for grants of incentive stock options to
employees (including officers and directors) and nonstatutory stock options,
restricted stock purchase awards, stock bonuses and stock appreciation rights
to employees (including officers and directors) of and consultants to the
Company. To date, only incentive stock options and nonstatutory stock
options have been awarded under the Incentive Plan. Incentive stock options
granted under the Incentive Plan are intended to qualify as "incentive stock
options" within the meaning of section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Nonstatutory stock options granted under the
Incentive Plan are intended not to qualify as incentive stock options under
the Code. See "Federal Income Tax Information" for a discussion of the tax
treatment of the various awards available under the Incentive Plan.
PURPOSE
The Incentive Plan was adopted to provide a means by which selected
officers and employees of and consultants to the Company and its affiliates
could be given an opportunity to purchase stock in the Company, to assist in
retaining the services of employees holding key positions, to secure and
retain the services of persons capable of filling such positions and to
provide incentives for such persons to exert maximum efforts for the success
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of the Company. All of the Company's approximately 24 employees are
currently eligible to participate in the Incentive Plan.
ADMINISTRATION
With respect to employee-officers, directors, employee-directors and
consultant-directors, the Incentive Plan is administered by the Compensation
Committee. The Chief Executive Officer administers the Incentive Plan with
respect to all other employees and consultants. As used herein with respect
to the Incentive Plan, the "Administrator" refers to the Compensation
Committee and the Chief Executive Officer.
ELIGIBILITY
Incentive stock options may be granted under the Incentive Plan only to
employees (including directors and officers) of the Company and its
affiliates. Employees (including directors and officers), directors and
consultants are eligible to receive awards other than incentive stock options
under the Incentive Plan. No employee, director or consultant is eligible to
receive awards covering more than 200,000 shares of Common Stock in any
calendar year.
No incentive stock option may be granted under the Incentive Plan to any
person who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of the Company or
any affiliate of the Company, unless the option's exercise prices is at least
110% of the fair market value of the stock subject to the option on the date
of grant, and the term of the option does not exceed five years from the date
of grant. For incentive stock options granted under the Incentive Plan, the
aggregate fair market value, determined at the time of grant, of the shares
of Common Stock with respect to which such options are exercisable for the
first time by an optionee during any calendar year (under all such plans of
the Company and its affiliates) may not exceed $100,000.
STOCK SUBJECT TO THE INCENTIVE PLAN
If awards granted under the Incentive Plan expire or otherwise terminate
without being exercised, the Common Stock not purchased pursuant to such
awards again becomes available for issuance under the Incentive Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the Incentive Plan. Individual option grants may be more restrictive as to
any or all of the permissible terms described below.
EXERCISE PRICE; PAYMENT. The exercise price of incentive stock options
under the Incentive Plan may not be less than the fair market value of the
Common Stock subject to the option on the date of the option grant, and in
some cases (see "Eligibility" above), may not be less than 110% of such fair
market value. The exercise price of nonstatutory options under the Incentive
Plan is determined by the appropriate Administrator. However, if options are
granted with exercise prices below fair market value, deductions for
compensation attributable to the exercise of such options could be limited by
Section 162(m) of the Code. See "Federal Income Tax Information." At
January 2, 1998, the closing price of the Company's Common Stock as reported
on the American Stock Exchange was $15.6875 per share.
In the event of a decline in the value of the Company's Common Stock,
the Administrator has the authority to offer optionees the opportunity to
replace outstanding higher priced options, whether incentive or nonstatutory,
with new lower priced options.
The exercise price of options granted under the Incentive Plan must be
paid either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Administrator, (i) by delivery of other Common Stock of the
Company or (ii) pursuant to a deferred payment arrangement.
OPTION EXERCISE. Options granted under the Incentive Plan may become
exercisable in cumulative increments ("vest") as determined by the
Administrator. Shares covered by currently outstanding options typically
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vest at a rate of 20% or 25% every year following the date of grant, so that
the shares would be fully vested on the fifth or fourth anniversary of the
date of the grant, assuming the optionee's continued employment or services
as an employee, consultant or director. Shares covered by options granted in
the future under the Incentive Plan may be subject to different vesting
terms. To the extent provided by the terms of an option, an optionee may
satisfy any federal, state or local tax withholding obligation relating to
the exercise of such option by a cash payment upon exercise, by authorizing
the Company to withhold a portion of the stock otherwise issuable to the
optionee, by delivering already-owned stock of the Company or by a
combination of these means.
TERM. The maximum term of options under the Incentive Plan is ten
years, except that in certain cases (see "Eligibility") the maximum term is
five years. The Administrator has the authority to determine the terms by
which any option granted under the Incentive Plan terminates. Options
outstanding under the Incentive Plan have a term of seven years from the date
of grant. Notwithstanding this, incentive stock options granted to employees
generally terminate 90 days following termination of the optionees's
employment, or in some cases longer if termination of employment is a result
of the optionee's death or disability. Certain of the Company's executive
officers hold options which terminate upon the earlier of (a) the termination
of the optionee's employment with cause; (b) one year after (i) the
termination of optionee's employment without cause, (ii) any significant
reduction or adverse change in the nature or scope of the optionee's
authority, duties, status, position or compensation which would be a basis
for optionee to terminate any applicable employment agreement, (iii)
termination following a change of control of the Company or (iv) optionee's
retirement, death or disability; or (c) seven years after the date of grant.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
The Administrator may grant stock bonus and restricted stock awards to
employees, consultants and consultant-directors and determines the terms and
conditions of such grants, including the number of shares awarded. Stock
bonus awards must be granted based on the achievement of performance or other
goals as determined by the Administrator. Restricted stock awards must
include certain restrictions including at least one term or condition
constituting a "substantial risk of forfeiture" as defined by Section 83(c)
of the Code. In addition, restricted stock awards may, but need not, be
subject to a requirement that in the event of the grantee's termination of
employment or other service with the Company prior to the lapse of any
applicable restrictions, all shares of restricted stock shall be forfeited by
the grantee to the Company without payment of consideration.
STOCK APPRECIATION RIGHTS
The Board may grant stock appreciation rights ("SARs") to the Company's
employees, consultants and consultant-directors.
SARs may be granted (a) in connection with the grant of an option, (b)
by amendment of an outstanding nonstatutory option or (c) independently of
any option (SARs described in (a) and (b) shall sometimes be referred to as
"Related SARs").
SARs entitle the grantee to receive a distribution in an amount not to
exceed the number of shares of Common Stock subject to the portion of the SAR
exercised multiplied by an amount equal to the market price of a share of
Common Stock on the date of exercise of the SAR less the market price of a
share of Common Stock on the date of grant of the SAR or, in the case of a
Related SAR, the exercise price of the related option. Such distributions
are payable in cash or shares of Common Stock, or a combination thereof.
The period during which SARs may be exercised shall be determined by the
appropriate Administrator; provided, however, a SAR (a) may not be exercised
until six months after the date of grant; (b) will expire no later than the
earlier of ten years from the date of grant or, in the case of a Related SAR,
the expiration of the related option; (c) may be exercised only when the
market price of a share of Common Stock exceeds either (i) the market price
of a share of Common Stock on the date of grant or (ii) in the case of a
Related SAR, the exercise price of the related option; and (d) in the case of
a Related SAR tied to an incentive stock option, may be exercised only when
and to the extent such option is exercisable. The exercise, in whole or in
part, of a Related SAR shall cause the number of shares of Common Stock
subject to the related option to be reduced by the same number of shares.
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PERFORMANCE UNITS
Under the Incentive Plan, the Administrator may grant performance units
to the Company's employees, consultants and consultant-directors, which
entitles a grantee to receive a distribution based on the degree to which
performance standards established by the Administrator have been satisfied by
the individual grantee or the Company (the "Performance Unit"). Such
distributions are payable in cash or shares of Common Stock, or a combination
thereof.
Performance Units may be granted (a) in connection with the grant of an
option, (b) by amendment of an outstanding nonstatutory option or (c)
independently of any option (Performance Units described in (a) and (b) shall
sometimes be referred to as "Related Performance Units").
The period during which Performance Units may be exercised shall be
determined by the appropriate Administrator; provided, however, a Performance
Unit (a) may not be exercised until six months after the date of grant if
Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") so dictates, and (b) will expire no later than the
earlier of ten years from the date of grant or, in the case of a Related
Performance Unit, the expiration of the related option.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the Incentive Plan or
subject to any award granted under the Incentive Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Incentive Plan and awards outstanding thereunder will be appropriately
adjusted as to the class and the maximum number of shares subject to such
plan and the class, number of shares and price per share of stock subject to
such outstanding awards.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the Incentive Plan without
stockholder approval or ratification at any time or from time to time.
Unless sooner terminated, the Incentive Plan will terminate on September 30,
2003.
The Board may also amend the Incentive Plan at any time or from time to
time. However, no amendment will be effective unless approved by the
stockholders of the Company within twelve months before or after its adoption
by the Board if the amendment would: (a) increase materially the number of
shares reserved under the Incentive Plan; (b) modify materially the
requirements as to eligibility for participation under the Incentive Plan;
(c) change the class of persons eligible to receive incentive stock options;
(d) increase materially the benefits accruing to participants under the
Incentive Plan or (e) change any other provision of the Plan in any other way
if such modification requires stockholder approval in order to comply with
Rule 16b-3 or satisfy the requirements of Section 422 of the Code.
RESTRICTIONS ON TRANSFER
Under the Incentive Plan, options, SARs, Performance Units and stock
bonuses may not be transferred by the optionee or grantee except by will or
by the laws of descent and distribution and, in the case of incentive stock
options, pursuant to a "qualified domestic relations order" as defined in
Section 414(p) of the Code. An option, a SAR or a Performance Unit may be
exercised during the grantee's lifetime only by the grantee or, in the event
of a legal disability, by the grantee's legal representative.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the Incentive
Plan are intended to be eligible for the favorable federal income tax
treatment accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee
or the Company by reason of the grant or exercise of an incentive stock
option. However, the exercise of an incentive stock option may increase the
optionee's alternative minimum tax liability, if any.
7
<PAGE>
If an optionee holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is
granted and at least one year from the date on which the shares are
transferred to the optionee upon exercise of the option, any gain or loss on
a disposition of such stock will be capital gain or loss. Generally, if the
optionee disposes of the stock before the expiration of either of these
holding periods (a "disqualifying disposition"), at the time of disposition,
the optionee will realize taxable ordinary income equal to the lesser of (a)
the excess of the stock's fair market value on the date of exercise over the
exercise price, or (b) the optionee's actual gain, if any, on the purchase
and sale. The optionee's additional gain, or any loss, upon the
disqualifying disposition will be a capital gain or loss, which will be
long-term, mid-term or short-term depending on how long the stock was held by
the optionee. Capital gains currently are generally subject to lower tax
rates than ordinary income. Slightly different rules may apply to optionees
who acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the
Code and the satisfaction of a tax reporting obligation) to a corresponding
business expense deduction in the tax year in which the disqualifying
disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under
the Incentive Plan generally have the following federal income tax
consequences: There are no tax consequences to the optionee or the Company by
reason of the grant of a nonstatutory stock option. Upon exercise of a
nonstatutory stock option, the optionee normally will recognize taxable
ordinary income equal to the excess of the stock's fair market value on the
date of exercise over the option exercise price. Generally, with respect to
employees, the Company is required to withhold from regular wages or
supplemental wage payments an amount based on the ordinary income recognized.
Subject to the requirement of reasonableness, the provisions of Section
162(m) of the Code and the satisfaction of a tax reporting obligation, the
Company will generally be entitled to a business expense deduction equal to
the taxable ordinary income realized by the optionee. Upon disposition of
the stock, the optionee will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock plus any amount recognized as ordinary income upon exercise of the
option. Such gain or loss will be long-term, mid-term or short-term
depending on how long the stock was held by the optionee. Slightly different
rules may apply to optionees who acquire stock subject to certain repurchase
options or who are subject to Section 16(b) of the Exchange Act.
RESTRICTED STOCK AND STOCK BONUSES. Restricted stock and stock bonuses
granted under the Incentive Plan generally have the following federal income
tax consequences: Upon acquisition of stock under a restricted stock or
stock bonus award, the recipient normally will recognize taxable ordinary
income equal to the excess of the stock's fair market value over the purchase
price, if any. However, to the extent the stock is subject to certain types
of vesting restrictions, the taxable event will be delayed until the vesting
restrictions lapse unless the recipient elects to be taxed on receipt of the
stock. Generally, with respect to employees, the Company is required to
withhold from regular wages or supplemental wage payments an amount based on
the ordinary income recognized. Subject to the requirement of
reasonableness, Section 162(m) of the Code and the satisfaction of a tax
reporting obligation, the Company will generally be entitled to a business
expense deduction equal to the taxable ordinary income realized by the
recipient. Upon disposition of the stock, the recipient will recognize a
capital gain or loss equal to the difference between the selling price and
the sum of the amount paid for such stock, if any, plus any amount recognized
as ordinary income upon acquisition (or vesting) of the stock. Such gain or
loss will be long-term, mid-term or short-term depending on how long the
stock was held by the grantee. Slightly different rules may apply to persons
who acquire stock subject to forfeiture.
STOCK APPRECIATION RIGHTS AND PERFORMANCE UNITS. No taxable income is
realized upon the receipt of a stock appreciation right or performance unit,
but upon exercise of the stock appreciation right or performance unit, the
fair market value of the shares (or cash in lieu of shares) received must be
treated as compensation taxable as ordinary income to the recipient in the
year of such exercise. Generally, with respect to employees, the Company is
required to withhold from the payment made on exercise of the stock
appreciation right or performance unit, or from regular wages or supplemental
wage payments, an amount based on the ordinary income recognized. Subject to
the requirement of reasonableness, Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will be entitled to a
business expense deduction equal to the taxable ordinary income recognized by
the recipient.
8
<PAGE>
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. In 1993, the U.S. Congress
amended the Code to add Section 162(m), which denies a deduction to any
publicly held corporation for compensation paid to certain employees in a
taxable year to the extent that compensation exceeds $1 million for a covered
employee. It is possible that compensation attributable to awards under the
Incentive Plan, when combined with all other types of compensation received
by a covered employee from the Company, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with applicable Treasury regulations issued under Section 162(m)
of the Code, compensation attributable to stock options and stock
appreciation rights will qualify as performance-based compensation, provided
that: (i) the stock award plan contains a per-employee limitation on the
number of shares for which stock options and stock appreciation rights may be
granted during a specified period; (ii) the per-employee limitation is
approved by the stockholders; (iii) the award is granted by a compensation
committee comprised solely of "outside directors"; and (iv) the exercise
price of the award is no less than the fair market value of the stock on the
date of grant. Compensation attributable to restricted stock will qualify as
performance-based compensation, provided that: (i) the award is granted by a
compensation committee comprised solely of "outside directors"; and (ii) the
purchase price of the award is no less than the fair market value of the
stock on the date of grant. Stock bonuses qualify as performance-based
compensation under these Treasury regulations only if: (i) the award is
granted by a compensation committee comprised solely of "outside directors;"
(ii) the award is granted (or exercisable) only upon the achievement of an
objective performance goal established in writing by the compensation
committee while the outcome is substantially uncertain; (iii) the
compensation committee certifies in writing prior to the granting (or
exercisability) of the award that the performance goal has been satisfied;
and (iv) prior to the granting (or exercisability) of the award, stockholders
have approved the material terms of the award (including the class of
employees eligible for such award, the business criteria on which the
performance goal is based, and the maximum amount (or formula used to
calculate the amount) payable upon attainment of the performance goal).
OPTIONS GRANTED
At January 2, 1998, options to purchase an aggregate of 856,916 shares
at exercise prices ranging from $3.75 to $15.00 per share of the Company's
Common Stock were outstanding under the Incentive Plan, and 126,934 shares
(plus any shares that might in the future be returned to the Incentive Plan
as a result of cancellations or expiration of options) remained available for
future grant under the Incentive Plan, excluding the increase of 300,000
shares for which stockholder approval is sought.
9
<PAGE>
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP as the
Company's independent public accountants for the fiscal year ending September
30, 1998 and has further directed that management submit the selection of
independent auditors for ratification by the stockholders at the Annual
Meeting. KPMG Peat Marwick LLP has audited the Company's financial
statements since 1994. Representatives of KPMG Peat Marwick LLP are expected
to be present at the Annual Meeting, will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions. Stockholders ratification of the selection of KPMG Peat Marwick
LLP as the Company's independent public accountants is not required by the
Company's bylaws or otherwise. However, the Board is submitting the
selection of KPMG Peat Marwick LLP to the stockholders for ratification as a
matter of good corporate practice. If the stockholders fail to ratify the
selection, the Audit Committee and the Board will reconsider whether or not
to retain that firm. Even if the selection is ratified, the Audit Committee
and the Board at its discretion may direct the appointment of a different
independent accounting firm at any time during the year if they determine
that such a change would be in the best interests of the Company and its
stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of KPMG Peat Marwick LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF PROPOSAL 3.
10
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of January 2, 1998 by: (i) each nominee for
director; (ii) each director; (iii) each executive officer listed in the table
entitled Compensation of Executive Officers (iv) all executive officers and
directors of the Company as a group; and (v) all those known by the Company to
be beneficial owners of more than five percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP
-------------------- ----------------------------------------
NUMBER OF SHARES PERCENT OF TOTAL (2)
---------------- --------------------
<S> <C> <C>
Clearwater Funds (3)................................... 1,029,183 11.1%
611 Druid Hills Road East, No. 200
Clearwater, FL 34616
HealthCap KB (4)........................................ 639,947 6.8%
Sturegatan 34
SE 114 36, Stockholm, Sweden
S-E-Banken Funds (5).................................... 556,666 6.0%
Kastanjevagen 4
S-13246 Saltsjo-300, Sweden
F. Duwaine Townsen (6).................................. 462,317 5.0%
8880 Rio San Diego Drive, Suite 500
San Diego, CA 92108
Larry G. Stambaugh (7).................................. 256,267 2.7%
G. Steven Burrill (8)................................... 60,233 *
Colin B. Bier, Ph.D.(9)................................. 45,000 *
Per-Olof Martensson (10)................................ 40,333 *
Kurt R. Gehlsen, Ph.D. (11)............................. 31,967 *
Dale A. Sander (12)..................................... 12,000 *
All Directors and Officers as a Group (7 persons) (13) 908,117 9.3%
</TABLE>
______________________
* Less than 1%
(1) This table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Except as otherwise indicated, the
Company believes that each of the beneficial owners of the shares listed
above, based on information furnished by such owners, has sole investment
and voting power with respect to shares indicated as beneficially owned,
subject to community property laws where applicable.
(2) Percentage of beneficial ownership is based on an aggregate of shares of
Common Stock outstanding as of January 2, 1998, adjusted as required by
rules promulgated by the SEC.
(3) Includes 829,000 shares held by Clearwater Fund IV, LLC, and 200,183
shares held by Clearwater Offshore Fund, Ltd.
(4) Includes 175,000 redeemable warrants exercisable within 60 days of January
2, 1998.
(5) Includes 8,000 shares subject to warrants exercisable within 60 days of
January 2, 1998.
11
<PAGE>
(6) Includes (i) 369,866 shares and 16,666 shares subject to warrants
exercisable within 60 days of January 2, 1998 held by Ventana II, (ii)
1,825 shares subject to warrants exercisable within 60 days of January 2,
1998 held by Ventana Growth Capital Fund V L.P., (iii) 5,831 shares
subject to warrants exercisable within 60 days of January 2, 1998 held by
Ventana Partnership III L.P. Mr. Townsen, a director of the Company, is
a general partner of each of the aforementioned entities. Mr. Townsen
disclaims beneficial ownership of all shares held by such entities except
to the extent of his pecuniary interest therein, if any. Includes 9,296
shares and 83 shares subject to warrants exercisable within 60 days of
January 2, 1998 held jointly by Mr. Townsen and his wife. Also includes
50,000 shares subject to stock options exercisable within 60 days of
January 2, 1998 and 8,750 shares subject to warrants exercisable within
60 days of January 2, 1998 held by Mr. Townsen.
(7) Includes 1,000 shares and 1,000 redeemable warrants exercisable within 60
days of January 2, 1998 held by Mr. Stambaugh's spouse, and 229,167 shares
subject to stock options exercisable within 60 days of January 2, 1998.
(8) Includes 60,233 shares subject to warrants exercisable within 60 days of
January 2, 1998 held by Burrill & Company, Inc. Mr. Burrill is the Chief
Executive Officer and a principal of Burrill & Company, Inc. Mr. Burrill
disclaims beneficial ownership of all shares held by Burrill &
Company, Inc. except to the extent of his pecuniary interest therein,
if any.
(9) Includes 45,000 shares subject to stock options exercisable within
60 days of January 2, 1998.
(10) Includes 40,000 shares subject to stock options exercisable within 60
days of January 2, 1998.
(11) Includes 2,400 shares subject to redeemable warrants exercisable
within 60 days of January 2, 1998 held by the immediate family of
Dr. Gehlsen and 17,167 shares subject to stock options exercisable
within 60 days of January 2, 1998.
(12) Includes 12,000 shares subject to stock options exercisable within 60
days of January 2, 1998.
(13) Includes 3,400 shares subject to redeemable warrants, 93,388 shares
subject to warrants and 393,334 shares subject to stock options
exercisable within 60 days of January 2, 1998. See Notes 6-12.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file. To
the Company's knowledge, based solely upon a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended September 30, 1997, all
Section 16(a) filing requirements were complied with, except that one
report, covering one transaction, was filed late by Mr. Townsen.
12
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company has adopted a director compensation policy under which each
non-employee director of the Company will receive an annual fee of $4,000 and a
per-meeting fee of $1,000, if attended in person, or $500 if attended by
telephone. Each non-employee director will also receive a fee of $250 per
committee meeting attended ($500 per committee meeting attended in the capacity
as that committee's chairperson). In the fiscal year ended September 30, 1997,
the total compensation paid to non-employee directors was $24,500. In addition,
each non-employee director will receive an automatic stock option grant of
10,000 shares of Common Stock upon his election or reelection to the Board and
5,000 shares annually if he attends at least 75% of the meetings held during a
fiscal year. Non-employee directors are also eligible for reimbursement for
their expenses incurred in connection with attendance at Board meetings in
accordance with Company policy. Notwithstanding the foregoing, Mr. Burrill is
not entitled to receive the above-described fees because of his firm's
consulting arrangement with the Company. In connection with his reelection as
a director at the February 11, 1997 annual meeting of stockholders of the
Company, the Company granted Mr. Townsen a fully vested option to purchase
10,000 shares of Common Stock at an exercise price of $8.875 per share.
Mr. Stambaugh was granted stock options on November 19, 1996 and October 30,
1997 in connection with his services as President and Chief Executive Officer
as described in "Compensation of Executive Officers" below. In addition,
entities affiliated with certain of the directors have, from time to time,
entered into transactions with the Company. See "Certain Transactions."
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, their positions with the Company
and experience are set forth below.
Year in
which he
became an
Name Position(s) Age Officer
- ---- ----------- --- -------
Larry G. Stambaugh President and Chief 50 1993
Executive Officer
Kurt R. Gehlsen Vice President, Development 41 1996
and Chief Technical Officer
Dale A. Sander Vice President, Finance, 38 1996
Chief Financial Officer
and Secretary
The officers of the Company hold office at the discretion of the Board of
Directors of the Company. During Fiscal 1997, the officers of the Company
devoted substantially all of their business time to the affairs of the Company
for the period in which they were employed, and they intend to do so during
Fiscal 1998.
LARRY G. STAMBAUGH has served as the Company's Chairman of the Board of
Directors, President and Chief Executive Officer since 1993. From 1989 to
1992, Mr. Stambaugh served in a number of positions at ABC Laboratories, Inc.,
an international contract science research laboratory, including Chairman of
the Board of Directors, President and Chief Executive Officer. From 1983 to
1989, Mr. Stambaugh served as Executive Vice President and Chief Financial
Officer of CNB Financial Corporation, a multi-bank holding company.
Mr. Stambaugh received a B.A. in business administration from Washburn
University and is a certified public accountant.
KURT R. GEHLSEN, PH.D. joined the Company as Chief Technical Officer and
Vice President, Development in 1996. From 1991 to 1995, Dr. Gehlsen served as
Chairman of the Board of Directors, President and Chief Executive Officer of
Trauma Products, Inc., a biomedical company. From 1989 to 1991, Dr. Gehlsen
served as Senior Research Scientist and Head, Division of Molecular and
Cellular Biology, Pharmacia Experimental Medicine Division of Pharmacia, Inc.,
a biopharmaceutical company and as Vice President, Chief Operating Officer and
Director of
13
<PAGE>
Molecular and Cellular Biology for the La Jolla Institute for Experimental
Medicine. Dr. Gehlsen received a B.S. in biology from the University of
Arizona and a Ph.D. from the University of Arizona College of Medicine.
DALE A. SANDER joined the Company in 1996 as Chief Financial Officer, Vice
President, Finance and Secretary. From 1993 to 1996, Mr. Sander served as
Chief Financial Officer of Pacific Pharmaceuticals, Inc., a biotech company.
From 1991 to 1993, Mr. Sander served as Chief Financial Officer of Tactyl
Technologies, Inc., a medical device manufacturer. Prior to 1991 he worked for
over nine years with Ernst & Young, an international professional service firm.
Mr. Sander is a Certified Public Accountant and has a B.S. in Accounting from
San Diego State University.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows, for each of the three fiscal years ending
September 30, 1997, compensation awarded or paid to or earned by the Company's
Chief Executive Officer and its other two executive officers at September 30,
1997 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
- ------------------- ------------
OTHER ANNUAL SECURITIES
COMPENSATION UNDERLYING
PRINCIPAL POSITION (1) YEAR SALARY($) BONUS($)(2) ($)(4) OPTIONS(#)
- ---------------------- ---- --------- ----------- ------ ----------
<S> <C> <C> <C> <C> <C>
Larry G. Stambaugh 1997 $225,000 $60,000 $ 692 83,333
President and Chief Executive 1996 $180,000 $67,500 $ - 233,333
Officer 1995 $180,000 $54,000 $ - 16,666
Kurt R. Gehlsen, Ph.D. (3) 1997 $140,000 $20,000 $ 808 23,334
Vice President, Development 1996 $126,000(5) $ - $ - 66,666
and Chief Technical Officer 1995 $ - $ - $ - -
Dale A. Sander (3) 1997 $125,000 $15,000 $ 721 75,000
Vice President, Finance, 1996 $ - $ - $ - -
Chief Financial Officer and 1995 $ - $ - $ - -
Secretary
</TABLE>
______________
(1) The principal position for each of the Named Executive Officers reflects
the offices and titles held by each of them for the fiscal year ended
September 30, 1997.
(2) Bonuses are reflected in the fiscal year earned.
(3) Dr. Gehlsen and Mr. Sander's employment commenced in May 1996 and
October 1996, respectively.
(4) Other Annual Compensation is comprised of the Company's nondiscretionary
matching contribution to its 401(k) plan.
(5) Dr. Gehlsen's fiscal year 1996 salary has been annualized.
14
<PAGE>
The following table shows, for the fiscal year ended September 30, 1997,
certain information regarding options granted to the Named Executive Officers.
OPTION GRANTS DURING YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZED
SECURITIES % OF TOTAL VALUE AT ASSUMED
UNDERLYING OPTIONS ANNUAL RATE OF STOCK
OPTIONS GRANTED TO EXERCISE PRICE PRICE APPRECIATION FOR
GRANTED EMPLOYEES IN PER SHARE EXPIRATION OPTION TERM($)(2)
------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
- ------------------------ ----------- --------------- -------------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Larry G. Stambaugh....... 83,333 35.2% $9.00 11/19/03 $305,324 $711,535
Kurt R. Gehlsen, Ph.D.... 10,000 4.2% $9.00 11/19/03 $ 36,639 $ 85,385
13,334 5.7% $8.88 08/19/04 $ 48,176 $112,270
Dale A. Sander........... 30,000 12.7% $9.00 11/19/03 $109,917 $256,154
45,000 19.0% $8.88 08/19/04 $162,586 $378,894
</TABLE>
___________
(1) Consists of stock options granted pursuant to the Plan. The maximum term
of each option granted is seven years from the date of grant. The exercise
price is equal to the market value of the stock on the grant date as
adjusted for subsequent stock splits.
(2) In accordance with the rules of the SEC, shown are the gains or "option
spreads" that would exist for the respective options granted. These gains
are based on the assumed rates of annually compounded stock price
appreciation of 5% and 10% from the date the option was granted over the
full option term. These assumed annually compounded rates of stock price
appreciation are mandated by the rules of the SEC and do not represent the
Company's estimates or projection of future Common Stock prices.
The following table sets forth certain information for the Named Executive
Officers with respect to the exercise of options to purchase Common Stock
during the fiscal year ended September 30, 1997 and the number and value of
securities underlying unexercised options held by the Named Executive Officers
as of September 30, 1997.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED
SEPTEMBER 30, 1997 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES NUMBER OF SHARES OF
ACQUIRED COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
ON VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED SEPTEMBER 30, 1997 SEPTEMBER 30, 1997 ($)
------------------ ----------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry G. Stambaugh - - 195,833 120,833 $ 2,191,659 $ 1,091,669
Kurt R. Gehlsen, Ph.D. - - 29,167 60,833 $ 329,587 $ 607,076
Dale A. Sander - - 12,000 63,000 $ 78,000 $ 415,125
</TABLE>
__________
(1) Represents the fair market value of the underlying shares on the date of
exercise less the exercise or base price, and does not necessarily imply
that the shares were sold by the optionee.
15
<PAGE>
EMPLOYMENT AGREEMENTS
Pursuant to an executive employment agreement between the Company and
Larry G. Stambaugh, the Chairman, President and Chief Executive Officer of
the Company, dated November 5, 1997, Mr. Stambaugh receives an annual salary
of not less than $275,000, an annual bonus in an amount up to 30% of his
annualized base salary and equity compensation as determined by the Board of
Directors. The term of Mr. Stambaugh's employment agreement expires on
September 30, 2000. The employment agreement also provides that, if Mr.
Stambaugh's employment is terminated without cause or upon constructive
discharge, he will receive a severance payment equal to his then annual base
salary plus health care insurance coverage for one year or the remainder of
the term of his employment agreement, whichever is greater. In connection
with his employment agreement, on October 31, 1997, Mr. Stambaugh was granted
an option to purchase 83,334 shares of Common Stock at an exercise price of
$14.50 per share, vesting over approximately four years. Mr. Stambaugh's
stock option agreements provide that such options will become fully
exercisable in the event his employment is terminated without cause or
following a change in control of the Company. In addition, the Company has
agreed to pay a portion of the cost of maintaining a life insurance policy in
the amount of $1,000,000 on Mr. Stambaugh's behalf.
Pursuant to an executive employment agreement between the Company and
Kurt R. Gehlsen, Ph.D., the Chief Technical Officer and Vice President,
Development of the Company, dated October 1, 1997, Dr. Gehlsen receives an
annual salary of not less than $175,000 and an annual bonus and equity
compensation as determined by the Board of Directors. The term of Dr.
Gehlsen's employment agreement expires on December 31, 1999. The employment
agreement provides that if Dr. Gehlsen's employment is terminated without
cause he will be entitled to continuation of his then base salary and health
benefits for six months. Dr. Gehlsen's stock option agreements provide that
such options will become fully exercisable in the event his employment is
terminated without cause or following a change in control of the Company.
Pursuant to an executive employment agreement between the Company and
Dale A. Sander, the Chief Financial Officer and Vice President, Finance of
the Company, dated October 1, 1997, Mr. Sander receives an annual salary of
not less than $150,000 and an annual bonus and equity compensation as
determined by the Board of Directors. The term of Mr. Sander's employment
agreement expires on December 31, 1999. The employment agreement provides
that if Mr. Sander's employment is terminated without cause he will be
entitled to continuation of his then base salary and health benefits for six
months. Mr. Sander's stock option agreements provide that such options will
become fully exercisable in the event his employment is terminated without
cause or following a change in control of the Company.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION(1)
The Company's executive compensation program is administered by the
Compensation Committee (the "Committee") of the Board of Directors. The
Committee is appointed by the Board and is comprised of three outside,
non-employee Directors. The Committee has responsibility for all
compensation matters concerning the Company's executive officers.
COMPENSATION PHILOSOPHY
The Board's executive compensation program strongly links management pay
with the Company's annual and long-term performance. The program is intended
to attract, motivate and retain senior management by providing compensation
opportunities that are consistent with Company performance. The program
provides for base salaries which reflect such factors as level of
responsibility, individual performance, internal fairness and external
competitiveness; annual incentive cash bonus awards which are payable upon
the Company's achievement of annual financial and management objectives
approved by the Board; and long-term incentive opportunities in the
_________________________________
(1) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC, and is not to be incorporated by reference into any
filing of the Company under the Securities Act of 1933, as amended (the
"Securities Act") or the Exchange Act, whether made before or after the
date hereof and irrespective of any general incorporation language
contained in such filing.
16
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form of stock options and other equity incentives which strengthen the
mutuality of interest between management and the Company's stockholders.
Each executive officer's target total annual compensation (i.e., salary plus
bonus) is determined after a review of independent survey data regarding
similarly situated executives at firms in the Company's industry. While the
income tax implications of the compensation program to the Company and its
division executive officers are continually assessed, including the $1
million per covered employee limitation on the compensation expenses
deductible by the Company, they are not presently a significant factor in the
administration of the program.
The Company strives to provide compensation opportunities which
emphasize effectively rewarding management for the achievement of critical
performance objectives. The Committee supports a pay-for-performance policy
that determines compensation amounts based on Company and individual
performance. While the establishment of base salaries turns principally on
the factors noted above, annual incentive bonuses for senior corporate
executives are based on the performance of the Company as a whole. In
addition, the program provides stock incentive opportunities designed to
align the interests of executives and other key employees with other
stockholders through the ownership of Common Stock. The following is a
discussion of each of the elements of the Company's executive compensation
program including a description of the decisions and actions taken by the
Committee with respect to compensation in fiscal 1997 for the Chief Executive
Officer and all executive officers as a group.
MANAGEMENT COMPENSATION PROGRAM
Compensation paid to the Company's executive officers for fiscal 1997
(as reflected in the foregoing tables with respect to the Named Executive
Officers) consisted of the following elements: base salary, annual incentive
cash bonuses under the Company's incentive bonus plans and stock options and
other equity incentives under the Incentive Plan.
BASE SALARY
With respect to determining the base salary of executive officers, the
Committee takes into consideration a variety of factors including the
executive's levels of responsibility and individual performance, and the
salaries of similar positions in the Company and in comparable companies in
the Company's industry. The Committee believes that its process for
determining and adjusting the base salary of executive officers is fully
consistent with sound personnel practices. Annual adjustments in base
salaries typically are made effective at the beginning of the fiscal year for
which they are intended to apply and therefore reflect in large part the
prior year's business and individual performance achievements.
ANNUAL INCENTIVE BONUS PROGRAM
The Company's incentive bonus program for its executive officers
(including the Named Executive Officers) is based on the achievement of
annual performance targets and other management objectives which are
established annually, but which are subject to adjustment as the Committee
deems appropriate. The Company's targets and objectives consist of
operating, strategic and financial goals that are considered to be critical
to the Company's fundamental long-term goal -- building stockholder value.
For fiscal 1997 these goals were:
- Increasing shareholder value and securing additional financing.
- Further advancing the commercialization of the MAXAMINE-TM- product
candidate, including initiation of pivotal human clinical testing.
- Implementing strategies relating to the marketing and manufacturing of
MAXAMINE.
- Identifying additional potential applications for the Company's key
products and technologies
Final calculation of the Company's financial performance and determination
and payment of the awards is made as soon as is practicable after the
completion of the Company's fiscal year. Individual incentive bonus awards to
executive officers for the Company's 1997 fiscal year were determined by the
Committee based on application of the aforementioned factors to the Company's
performance for fiscal 1997 and were paid after its conclusion.
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1993 LONG-TERM INCENTIVE PLAN
The long term incentive element of the Company's management compensation
program provides for grants of stock awards, which now include (i) incentive
stock options, (ii) nonstatutory stock options, (iii) stock bonuses, (iv)
rights to purchase restricted stock and (v) stock appreciation rights. These
discretionary stock awards are granted and administered by the Committee
under the Incentive Plan which is intended to create an opportunity for
employees of the Company to acquire an equity ownership interest in the
Company and thereby enhance their efforts in the service of the Company and
its stockholders. The compensatory and administrative features of the
Incentive Plan conform in all material respects to the design of standard
comparable plans in industry and are, in the Committee's estimation, fair and
reasonable.
Stock options granted to the Company's executive officers and other
employees of the Company typically include vesting provisions of up to five
years. The Committee believes that by rationing the exercisability of these
stock options over future years, the executive retention impact of the
Incentive Plan will be strengthened and management's motivation to enhance
the value of the Company's stock will be constructively influenced.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Stambaugh's annual incentive bonus award for fiscal 1997 was earned
under the same plan applicable to all other executive officers of the
Company. Based on the performance of the Company in the prior fiscal year and
the Committee's assessment of Mr. Stambaugh's ongoing personal performance in
the position of Chief Executive Officer, Mr. Stambaugh received an annual
incentive bonus award equal to approximately 27% of his fiscal 1997 year-end
salary. Among the factors considered by the Committee in its consideration of
Mr. Stambaugh's bonus were the continued progress of the commercialization of
MAXAMINE, and the successful completion shortly after year-end of a secondary
equity offering.
Mr. Stambaugh was granted stock options under the Incentive Plan for
83,333 shares of Common Stock on November 19, 1996, at the option price of
$9.00 per share, and 83,334 shares on October 30, 1997, at the option price
of $14.50 per share. He is eligible to receive additional option grants in
the future at the discretion of the Committee.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Code limits the Company to a deduction for federal
income tax purposes of no more than $1 million of compensation paid to
certain executive officers in a taxable year. Compensation above $1 million
may be deducted if it is "performance-based compensation" within the meaning
of the Code.
The statute containing this law and the applicable Treasury regulations
offer a number of transitional exceptions to this deduction limit for
pre-existing compensation plans, arrangements and binding contracts. As a
result, the Committee believes that at the present time it is quite unlikely
that the compensation paid to any Named Executive Officer in a taxable year
which is subject to the deduction limit will exceed $1 million. The
Committee has determined that stock options granted under the Incentive Plan
with an exercise price at least equal to the fair market value of the
Company's common stock on the date of grant shall be treated as
"performance-based compensation" under Section 162(m) of the Code. The
Compensation Committee has not yet established a policy for determining which
other forms of incentive compensation awarded to its Named Executive Officers
shall be designed to qualify as "performance-based compensation." The
Compensation Committee intends to continue to evaluate the effects of the
statute and any Treasury regulations and to comply with Code Section 162(m)
in the future to the extent consistent with the best interests of the Company.
G. Steven Burrill
Per-Olof Martensson
F. Duwaine Townsen
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's compensation committee consists of
Messrs. Burrill, Martensson and Townsen, none of which have ever served as
officers or employees of the Company.
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows a comparison of cumulative total returns on an
investment of $100 cash in the Company, the Hambrecht & Quist Biotech Index and
the American Stock Exchange Market Index for the period that commenced July 10,
1996 (the date on which the Company's Common Stock was first traded on the
American Stock Exchange) and ended on September 30, 1997. The graph assumes
that all dividends have been reinvested.
Cumulative Total Return
-------------------------
7/11/96 9/96 9/97
MAXIM PHARMACEUTICALS, INC. MMP 100 135 207
AMEX MARKET VALUE INDEX IXAX 100 99 125
HAMBRECHT & QUIST BIOTECHNOLOGY IHQB 100 106 113
_________________________________
(1) This Section is not "soliciting material," is not deemed "filed" with
the SEC and is not to be incorporated by reference in any filing of the
Company under the Securities Act or the Exchange Act whether made before or
after the date hereof and irrespective of any general incorporation language
in any such filing.
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CERTAIN TRANSACTIONS
In April 1997, the Company entered into agreements with Clearwater Fund
IV, LLC and Clearwater Offshore Fund, Ltd. (collectively the "Clearwater
Funds") and HealthCap KB, each beneficial holders of more than 5% of the
outstanding Common Stock of the Company. Under the agreements, the Company
agreed to file, on request, a registration statement covering the re-sale of
the 888,983 and 367,647 shares of Common Stock held by the Clearwater Funds
and HealthCap KB, respectively, provided that such shares are not freely
tradable at the time of the request.
In February 1996, the Company entered into an agreement with a
predecessor company of Burrill & Company, Inc. ("B&C"). G. Steven Burrill, a
director of the Company, is the Chief Executive Officer and a principal of
B&C. Pursuant to the agreement, the Company agreed to pay B&C a retainer of
$10,000 per month for three years, and the Company has granted B&C a warrant
expiring in February 2003 to purchase up to 173,333 shares of its Common
Stock at an exercise price of $3.00 per share. One-half of the shares
subject to this warrant vest ratably over 36 months from the date of the
agreement and the other one-half of such shares vest 30 days prior to the
expiration of the seven year term of the warrant; provided, however, that
vesting with respect to such shares may accelerate in connection with certain
performance-based events set forth in the agreement. In exchange for such
consideration, B&C provides strategic planning and advisory services to the
Company and has agreed to seek sources of private equity financing and
strategic corporate partners to assist in the development of the Company's
product candidates.
The Company has also entered into an employment agreement with each of
the Named Executive Officers, as described under the caption "Employment
Agreements." As described in "Compensation of Directors" and "Compensation
of Executive Officers," the Company has granted stock options to certain
directors and executive officers of the Company. The Company has entered
into indemnity agreements with each of its directors and officers and
currently maintains directors and officers insurance coverage.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ Dale A. Sander
Dale A. Sander
Secretary
January 12, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997 IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, MAXIM
PHARMACEUTICALS, INC., 10835 ALTMAN ROW, SUITE 150, SAN DIEGO, CALIFORNIA
92121.
20
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EXHIBIT A
MAXIM PHARMACEUTICALS, INC.
1993 LONG-TERM INCENTIVE PLAN
As Amended and Restated March 18, 1996
As Amended and Restated December 20, 1996
As Amended and Restated December 19, 1997
1. DEFINITIONS
In this Plan, except where the context otherwise indicates, the following
definitions apply:
1.1 "Agreement" means a written agreement implementing a grant of an
Option, Right or Performance Unit or an award of Restricted Stock or Incentive
Shares.
1.2 "Board" means the Board of Directors of the Company.
1.3 "Board Committee" means a current or future committee of the Board.
1.4 "Board Committee Meeting" means a meeting of a Board Committee.
1.5 "CEO" means the Company's chief executive officer.
1.6 "Code" means the Internal Revenue Code of 1986, as amended.
1.7 "Committee" means the committee of the Board meeting the standards of
Rule 16b-3(c)(2)(i) under the Exchange Act, or any similar successor rule,
appointed by the Board to administer the Plan. Unless otherwise determined by
the Board, the Compensation Committee of the Board shall be the Committee.
1.8 "Common Stock" means the common stock, par value $.001 per share, of
the Company.
1.9 "Company" means Maxim Pharmaceuticals, Inc.
1.10 "Consultant" means any person or entity performing services for the
Company or any Subsidiary other than as a Director or employee of the Company,
and who is not also a director or officer of the Company for purposes of Section
16(a) of the Exchange Act or a person who would be a director or officer of the
Company for purposes of Section 16(a) of the Exchange Act if the Common Stock
was registered under Section 12 of the Exchange Act.
1.
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1.11 "Consultant-Director" means any member of the Board who also is
performing services for the Company or any Subsidiary other than as a Director
or an employee of the Company.
1.12 "Covered Employee" means the CEO and the four (4) other highest
compensated officers of the Company for whom total compensation is required to
be reported to stockholders under the Exchange Act, as determined for purposes
of Section 162(m) of the Code.
1.13 "Date of Exercise" means the date on which the Company receives notice
of the exercise of an Option, Right or Performance Unit in accordance with the
terms of Article 10.
1.14 "Date of Grant" means the date on which an Option, Right or
Performance Unit is granted or Restricted Stock or Incentive Shares are awarded
by the Committee or the CEO, as the case may be.
1.15 "Director" means any person who is a member of the Board and who is
not also an employee of the Company.
1.16 "Employee" means any person determined by the CEO to be an employee of
the Company or any Subsidiary and who is not also a director or officer of the
Company for purposes of Section 16(a) of the Exchange Act or a person who would
be a director or officer of the Company for purposes of Section 16(a) of the
Exchange Act if the Common Stock was registered under Section 12 of the Exchange
Act.
1.17 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.18 "Excused Absence" means a Director's absence from a Scheduled Meeting
or a Board Committee Meeting due to illness, disability or family emergency.
1.19 "Fair Market Value" of a Share means the amount equal to the closing
sales price for a Share in the principal trading market for the Shares as
reported by such source as the Committee may select, or, if such price
quotations of the Common Stock are not then reported, then the fair market value
of a Share as determined by the Committee pursuant to a reasonable method
adopted in good faith for such purpose.
1.20 "Grantee" means an Employee, Covered Employee, Key Employee,
Consultant-Director or Consultant to whom Restricted Stock has been awarded
pursuant to Article 12 or Incentive Shares have been awarded pursuant to
Article 13.
1.21 "Incentive Shares" means Shares awarded pursuant to the provisions of
Article 13.
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1.22 "Incentive Stock Option" means an Option granted under the Plan that
qualifies as an incentive stock option under Section 422 of the Code and that
the Company designates as such in the Agreement granting the Option.
1.23 "Key Employee" means any person determined by the Committee to be an
employee of the Company or any Subsidiary and who is a director or officer of
the Company for purposes of Section 16(a) of the Exchange Act, or who would be a
director or officer of the Company for purposes of Section 16(a) of the Exchange
Act if the Common Stock was registered under Section 12 of the Exchange Act.
1.24 "Nonstatutory Stock Option" means an Option granted under the Plan
that is not an Incentive Stock Option.
1.25 "Option" means an option to purchase Shares granted under the Plan in
accordance with the terms of Article 7.
1.26 "Optionee" means a Director, Employee, Covered Employee, Key Employee,
Consultant-Director or Consultant to whom an Option, Right or Performance Unit
has been granted.
1.27 "Option Period" means the period during which an Option may be
exercised.
1.28 "Option Price" means the price per Share at which an Option may be
exercised. The Option Price shall be determined by the Committee, or by the
CEO, in the case of an Option granted to an Employee or Consultant, except that
in no event shall the Option Price be less than the par value of the Common
Stock or, in the case of an Incentive Stock Option, the greater of the Fair
Market Value per Share determined as of the Date of Grant or the par value of
the Common Stock.
1.29 "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
1.30 "Performance Unit" means a performance unit granted under the Plan in
accordance with the terms of Article 9.
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1.31 "Performance Unit Period" means the period during which a Performance
Unit may be exercised.
1.32 "Plan" means the Maxim Pharmaceuticals, Inc. 1993 Long-Term Incentive
Plan.
1.33 "Related Option" means the Option with which, or by amendment to
which, a specified Right or Performance Unit is granted.
1.34 "Related Performance Unit" means the Performance Unit granted in
connection with, or by amendment to, a specified Option.
1.35 "Related Right" means the Right granted in connection with, or by
amendment to, a specified Option.
1.36 "Restricted Stock" means Shares awarded pursuant to the provisions of
Article 12.
1.37 "Right" means a stock appreciation right granted under the Plan in
accordance with the terms of Article 8.
1.38 "Right Period" means the period during which a Right may be exercised.
1.39 "Scheduled Meeting" means the four regular meetings of the Board
scheduled to be held during each of the Company's fiscal years or, if more than
four regular meetings are scheduled, the four meetings designated as Scheduled
Meetings by the Board in scheduling its regular meetings for the year.
1.40 "Share" means a share of Common Stock.
1.41 "Subsidiary" means a corporation at least 50% of the total combined
voting power of all classes of stock of which is owned by the Company either
directly or through one or more Subsidiaries.
2. PURPOSE
This Plan is intended to aid in attracting qualified employees, directors
and consultants and in maintaining and developing strong management and employee
loyalty through encouraging the ownership of Common Stock by Directors and
selected Employees, Covered Employees, Key Employees, Consultant-Directors and
Consultants through stimulating their efforts by giving suitable recognition, in
addition to other remuneration, to the ability and industry which contribute
materially to the success of the Company's business interests, and to provide an
incentive to the continued service of such
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Directors, Employees, Covered Employees, Key Employees, Consultant-Director and
Consultants.
3. ADMINISTRATION (OTHER THAN GRANTS OR AWARDS TO EMPLOYEES AND CONSULTANTS)
Except with respect to grants or awards to Employees and Consultants, this
Plan shall be administered by the Committee. In addition to any other powers
granted to the Committee, the Committee shall have the following powers, subject
to the express provisions of the Plan:
3.1 subject to the provisions of Articles 5, 7, 8, 9, 10, 11, 12 and 13,
to determine in its discretion the Directors, Covered Employees, Key Employees
and Consultant-Directors to whom Options, Rights or Performance Units shall be
granted and to whom Restricted Stock and Incentive Shares shall be awarded, the
number of Shares to be subject to each Option, Right, Performance Unit,
Restricted Stock or Incentive Share award, and the terms upon which Options,
Rights or Performance Units may be acquired and exercised and the terms and
conditions of Restricted Stock and Incentive Share awards;
3.2 to determine all other terms and provisions of each Agreement, which
need not be identical;
3.3 without limiting the foregoing, to provide in its discretion in an
Agreement:
(i) for an agreement by the Optionee or Grantee to render services to
the Company or a Subsidiary upon such terms and conditions as may be specified
in the Agreement, provided that the Committee shall not have the power by virtue
of the Plan to commit the Company or a Subsidiary to employ or otherwise retain
any Optionee or Grantee;
(ii) for restrictions on the transfer, sale or other disposition of
Shares issued to the Optionee upon the exercise of an Option, Right or
Performance Unit, for other restrictions permitted by Article 12 with respect to
Restricted Stock and for conditions with respect to the issuance of Incentive
Shares;
(iii) for an agreement by the Optionee or Grantee to resell to the
Company, under specified conditions, Shares issued upon the exercise of an
Option, Right or Performance Unit or awarded as Restricted Stock or Incentive
Shares;
(iv) for the payment of the Option Price upon the exercise of an
Option otherwise than in cash, including without limitation by delivery of
Shares (other than Restricted Stock) valued at Fair Market Value on the Date of
Exercise of the Option, or a
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combination of cash and Shares, or for the payment in part of the Option Price
with a promissory note in accordance with the terms of Section 10.2; and
(v) for the deferral of receipt of amounts that otherwise would be
distributed upon exercise of a Performance Unit, the terms and conditions of any
such deferral and any interest or dividend equivalent or other payment that
shall accrue with respect to deferred distributions;
3.4 to construe and interpret the Agreements and the Plan;
3.5 to require, whether or not provided for in the pertinent Agreement, of
any person exercising an Option, Right or Performance Unit or acquiring
Restricted Stock or Incentive Shares, at the time of such exercise or
acquisition, the making of any representations or agreements which the Committee
may deem necessary or advisable in order to comply with the securities laws of
the United States or of any state;
3.6 to provide for satisfaction of an Optionee's or Grantee's tax
liabilities arising in connection with the Plan through, without limitation,
retention by the Company of Shares otherwise issuable on the exercise of a
Nonstatutory Stock Option, Right or Performance Unit or pursuant to an award of
Incentive Shares or through delivery of Shares to the Company by the Optionee or
Grantee under such terms and conditions as the Committee deems appropriate; and
3.7 to make all other determinations and take all other actions necessary
or advisable for the administration of the Plan, including action delegating to
a subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Committee shall thereafter be to such a subcommittee).
Any determinations or actions made or taken by the Committee pursuant to
this Article 3 shall be binding and final.
4. ADMINISTRATION FOR GRANTS AND AWARDS TO EMPLOYEES AND CONSULTANTS
In the case of grants or awards to Employees and Consultants, this Plan
shall be administered by the CEO. In addition to any other powers granted to
the CEO, the CEO shall have all of the powers with respect to grants or awards
to Employees and Consultants set forth in Article 3 that the Committee has with
respect to grants or awards to Directors, Covered Employees, Key Employees and
Consultant-Directors. When exercising authority pursuant to this Plan, the CEO
shall be acting as a committee of the Board. If the CEO is not a member of the
Board, then the powers of the CEO hereunder shall be exercised by the Committee.
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5. ELIGIBILITY
Options, Rights, Performance Units, Restricted Stock and Incentive Shares
may be granted or awarded only to Directors, Employees, Covered Employees, Key
Employees, Consultant-Directors and Consultants, except that Directors,
Consultant-Directors and Consultants (other than Consultants who also are
Employees, Covered Employees or Key Employees) are not eligible to receive
Incentive Stock Options. A Director, Employee, Covered Employee, Key Employee,
Consultant-Director or Consultant who has been granted an Option, Right or
Performance Unit or awarded Restricted Stock or Incentive Shares may be granted
additional Options, Rights or Performance Units or awarded additional Restricted
Stock or Incentive Shares.
6. STOCK SUBJECT TO THE PLAN
6.1 There is hereby reserved for issuance upon the exercise of Options,
Rights or Performance Units or for awards of Restricted Stock or Incentive
Shares an aggregate of 1,300,000 authorized but unissued or reacquired Shares.
6.2 If an Option, Right or Performance Unit (other than a Related Right or
Related Performance Unit) expires or terminates for any reason (other than, in
the case of an Option, termination by virtue of the exercise of a Related Right
or Related Performance Unit) without having been fully exercised, if Shares of
Restricted Stock are forfeited or if Incentive Shares are not issued, any
unissued or forfeited Shares which had been subject to the Agreement relating
thereto shall become available for the grant of other Options, Rights or
Performance Units or for the award of additional Restricted Stock or Incentive
Shares, provided, that in the case of forfeited Shares, the Grantee has received
no dividends prior to forfeiture with respect to such Shares.
6.3 The Shares issued upon the exercise of a Right or Performance Unit
(or, if cash is payable in connection with such exercise, that number of Shares
with respect to which the Right or Performance Unit is exercised), shall be
charged against the number of Shares issuable under the Plan and shall not
become available for the grant of other Options, Rights or Performance Units or
for the award of Restricted Stock or Incentive Shares.
6.4 Subject to the provisions of Article 14 relating to capital
adjustments, no Director, Employee, Covered Employee, Key Employee,
Consultant-Director, or Consultant shall be eligible to be granted Options and
Rights covering more than two hundred thousand (200,000) shares of Common Stock
in any calendar year. Shares subject to an Option or Right that is canceled
shall continue to be counted against the maximum award of Options and Rights
permitted to be granted pursuant to this Section
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6.4. The repricing of an Option and/or Right which results in a reduction of
the exercise price, shall be deemed to be a cancellation of the original Option
and/or Right and the grant of a substitute Option and/or Right; in the event of
such repricing, both the original and the substituted Options and Rights shall
be counted against the maximum awards of Options and Rights permitted to be
granted pursuant to this Section 6.4. The provisions of this Section 6.4 shall
be applicable only to the extent required by Section 162(m) of the Code.
7. OPTIONS
7.1 Subject to the provisions of Article 5, the Committee is hereby
authorized to grant Options to Directors, Covered Employees, Key Employees and
Consultant-Directors, and the CEO is hereby authorized to grant Options to
Employees and Consultants.
7.2 All Agreements granting Options shall contain a statement that the
Option is intended to be either (i) a Nonstatutory Stock Option or (ii) an
Incentive Stock Option.
7.3 The Option Period shall be determined by the Committee, or, in the
case of an Option granted to an Employee or Consultant, by the CEO, and
specifically set forth in the Agreement, provided, however, that an Option shall
not be exercisable after ten years from the Date of Grant.
7.4 All Incentive Stock Options granted under the Plan shall comply with
the provisions of the Code governing incentive stock options and with all other
applicable rules and regulations.
7.5 All other terms of Options granted under the Plan shall be determined
by the Committee in its sole discretion, or, in the case of an Option granted to
an Employee or Consultant, by the CEO in his sole discretion.
8. RIGHTS
8.1 The Committee is hereby authorized to grant Rights to Covered
Employees, Key Employees and Consultant-Directors, and the CEO is hereby
authorized to grant Rights to Employees and Consultants.
8.2 A Right may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of an
Option under the Plan;
(ii) by amendment of an outstanding Nonstatutory Stock Option granted
under the Plan; or
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(iii) independently of any Option granted under the Plan.
A Right granted under clause (i) or (ii) of the preceding sentence is a
Related Right. A Related Right may, in the Committee's discretion, or, in the
case of a Right granted to an Employee or Consultant, in the CEO's discretion,
apply to all or a portion of the Shares subject to the Related Option.
8.3 A Right may be exercised in whole or in part as provided in the
Agreement, and, subject to the provisions of the Agreement, entitles its
Optionee to receive, without any payment to the Company (other than required tax
withholding amounts), either cash or that number of Shares (equal to the highest
whole number of Shares), or a combination thereof, in an amount or having a Fair
Market Value determined as of the Date of Exercise not to exceed the number of
Shares subject to the portion of the Right exercised multiplied by an amount
equal to the excess of (i) the Fair Market Value of a Share on the Date of
Exercise of the Right over (ii) either (A) the Fair Market Value of a Share on
the Date of Grant of the Right if it is not a Related Right, or (B) the Option
Price as provided in the Related Option if the Right is a Related Right.
8.4 The Right Period shall be determined by the Committee, or, in the case
of a Right granted to an Employee or Consultant, by the CEO, and specifically
set forth in the Agreement, provided, however --
(i) a Right may not be exercised until the expiration of six months
from the Date of Grant (except that this limitation need not apply in the case
of a cash-only Right or in the event of the death or disability of the Optionee
within the six-month period);
(ii) a Right will expire no later than the earlier of (A) ten years
from the Date of Grant, or (B) in the case of a Related Right, the expiration of
the Related Option;
(iii) a Right may be exercised only when the Fair Market Value of a
share of Common Stock exceeds either (A) the Fair Market Value of a share of
Common Stock on the Date of Grant of the Right if it is not a Related Right, or
(B) the Option Price as provided in the Related Option if the Right is a Related
Right; and
(iv) a Right that is a Related Right to an Incentive Stock Option may
be exercised only when and to the extent the Related Option is exercisable.
8.5 The exercise, in whole or in part, of a Related Right shall cause a
reduction in the number of Shares subject to the Related Option equal to the
number of Shares with respect to which the Related Right is exercised.
Similarly, the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the
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Related Right equal to the number of Shares with respect to which the Related
Option is exercised.
8.6 Unless the Committee otherwise requires, Rights granted under the Plan
(other than cash-only Rights) to Covered Employees, Key Employees and
Consultant-Directors shall comply with the requirements of Rule 16b-3(e) under
the Exchange Act beginning with the date the Company's Common Stock is first
registered under Section 12 of the Exchange Act. Should any provision of this
Article 8 necessary for that purpose at the date of adoption of this Plan by the
Board no longer be necessary to comply with the requirements of Rule 16b-3(e) or
should any additional provisions be necessary for this Article 8 to comply with
the requirements of Rule 16b-3(e), the Board or the Committee may amend this
Plan to delete, add to or modify the provisions of the Plan accordingly. The
Company intends to comply, if and to the extent applicable, with the public
information and reporting requirements of Rule 16b-3(e)(1); however, the
Company's failure for any reason whatsoever to comply with such requirements or
with any other requirements of Rule 16b-3, and any resultant unavailability of
Rule 16b-3(e) to Optionees shall not impose any liability on the Company to any
Optionee or any other party.
8.7 To the extent required by Rule 16b-3(e) under the Exchange Act or
otherwise provided in the Agreement, the Committee shall have sole discretion to
consent to or disapprove the election of any Optionee who is a Covered Employee,
Key Employee or Consultant-Director to receive cash in full or partial
settlement of a Right. In cases where an election of settlement in cash must be
consented to by the Committee, the Committee may consent to, or disapprove, such
election at any time after such election, or within such period for taking
action as is specified in the election, and failure to give consent shall be
disapproval. Consent may be given in whole or as to a portion of the Right
surrendered by the Optionee. If the election to receive cash is disapproved in
whole or in part, the Right shall be deemed to have been exercised for Shares,
or, if so specified in the notice of exercise and election, not to have been
exercised to the extent the election to receive cash is disapproved.
9. PERFORMANCE UNITS
9.1 The Committee is hereby authorized to grant Performance Units to
Covered Employees, Key Employees and Consultant-Directors, and the CEO is hereby
authorized to grant Performance Units to Employees and Consultants.
9.2 A Performance Unit may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of an
Option under the Plan;
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(ii) by amendment of an outstanding Nonstatutory Stock Option granted
under the Plan; or
(iii) independently of any Option granted under the Plan.
A Performance Unit granted under clause (i) or (ii) of the preceding
sentence is a Related Performance Unit. A Related Performance Unit may, in the
Committee's discretion, or, in the case of a Performance Unit granted to an
Employee or Consultant, in the CEO's discretion, apply to all or a portion of
the Shares subject to the Related Option. A Performance Unit may not be granted
in connection with, or by amendment to, an Incentive Stock Option.
9.3 A Performance Unit may be exercised in whole or in part as provided in
the Agreement, and, subject to the provisions of the Agreement, entitles its
Optionee to receive, without any payment to the Company (other than required tax
withholding amounts), cash, Shares or a combination of cash and Shares, based on
the degree to which performance standards established by the Committee or the
CEO, as the case may be, and specified in the Agreement have been achieved.
Such performance standards may be particular to an Employee, Covered Employee,
Key Employee, Consultant-Director or Consultant or the department, branch,
Subsidiary or other division in which the Optionee works, or may be based on the
performance of the Company generally, and may cover such period as may be
specified by the Committee or the CEO, as the case may be. The performance
standards may be based on earnings or earnings growth, return on assets, equity
or investment, regulatory compliance, improvement of financial ratings,
achievement of balance sheet or income statement objectives, or any other
objective goals established by the Committee or the CEO, as the case may be, and
may be absolute in their terms or measured against or in relationship to other
companies comparably, similarly or otherwise situated.
9.4 The Performance Period shall be determined by the Committee, or, in
the case of a Performance Unit granted to an Employee or Consultant, by the CEO,
and specifically set forth in the Agreement, provided, however --
(i) if required for purposes of Rule 16b-3 under the Exchange Act or
otherwise under the terms of the Agreement, a Performance Unit may not be
exercised until the expiration of six months from the Date of Grant (except that
this limitation need not apply in the case of a cash-only Performance Unit or in
the event of the death or disability of the Optionee within the six-month
period); and
(ii) a Performance Unit will expire no later than the earlier of (A)
ten years from the Date of Grant, or (B) in the case of a Related Performance
Unit, the expiration of the Related Option.
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9.5 Each Agreement granting Performance Units shall specify the number of
Performance Units granted, provided, however, that the maximum number of Related
Performance Units may not exceed the maximum number of Shares subject to the
Related Option.
9.6 The exercise, in whole or in part, of a Related Performance Unit shall
cause a reduction in the number of Shares subject to the Related Option and the
number of Performance Units in accordance with the terms of the Agreement.
Similarly, the exercise, in whole or in part, of a Related Option shall cause a
reduction in the number of Shares subject to the Related Performance Unit equal
to the number of Shares with respect to which the Related Option is exercised.
9.7 In the case of a Performance Unit that qualifies as a "derivative
security" within the meaning of Rule 16a-1(c) under the Exchange Act, and unless
the Committee otherwise requires, Performance Units granted under the Plan
(other than cash-only Performance Units) to Covered Employees, Key Employees or
Consultant-Directors shall comply with the requirements of Rule 16b-3 beginning
with the date the Company's Common Stock is first registered under Section 12 of
the Exchange Act. Should any provision of this Article 9 necessary for that
purpose at the date of adoption of this Plan by the Board no longer be necessary
to comply with the requirements of Rule 16b-3 or should any additional
provisions be necessary for this Article 9 to comply with the requirements of
Rule 16b-3, the Board or the Committee may amend this Plan to delete, add to or
modify the provisions of the Plan accordingly. The Company intends to comply,
if and to the extent applicable, with the public information and reporting
requirements of Rule 16b-3(e)(1); however, the Company's failure for any reason
whatsoever to comply with such requirements or with any other requirements of
Rule 16b-3, and any resultant unavailability of Rule 16b-3 to Optionees shall
not impose any liability on the Company to any Optionee or any other party.
9.8 To the extent required by Rule 16b-3(e) under the Exchange Act or
otherwise provided in the Agreement, the Committee shall have sole discretion to
consent to or disapprove the election of any Optionee who is a Covered Employee,
Key Employee or Consultant-Director to receive cash in full or partial
settlement of a Performance Unit. In cases where an election of settlement in
cash must be consented to by the Committee, the Committee may consent to, or
disapprove, such election at any time after such election, or within such period
for taking action as is specified in the election, and failure to give consent
shall be disapproval. Consent may be given in whole or as to a portion of the
Performance Unit surrendered by the Optionee. If the election to receive cash
is disapproved in whole or in part, the Performance Unit shall be deemed to have
been exercised for Shares, or, if so specified in the notice of exercise and
election, not to have been exercised to the extent the election to receive cash
is disapproved.
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10. EXERCISE
10.1 An Option, Right or Performance Unit may, subject to the provisions of
the Agreement under which it was granted, be exercised in whole or in part by
the delivery to the Company of written notice of the exercise, in such form as
the Committee or the CEO, in the case of an Option, Right or Performance Unit
granted to an Employee or Consultant, may prescribe, accompanied, in the case of
an Option, by full payment for the Shares with respect to which the Option is
exercised, unless and to the extent that the Committee, or the CEO, as the case
may be, agreed in the Agreement in which an Option was granted to accept a
promissory note as provided in Section 10.2 hereof.
10.2 To the extent permitted by applicable law, the Committee or the CEO,
in the case of an Option, Right or Performance Unit granted to an Employee or
Consultant, may agree in the Agreement in which an Option is granted to accept
as partial payment for the Shares a promissory note of the Optionee evidencing
his or her obligation to make future cash payment thereof; provided, however,
that in no event may the Committee or the CEO accept a promissory note for an
amount in excess of the difference between the aggregate Option Price and the
par value of the Shares. Promissory notes made pursuant to this Section 10.2
shall be payable as determined by the Committee or the CEO, in the case of an
Option granted to an Employee or Consultant, shall be secured by a pledge of the
Shares and shall bear interest at a rate fixed by the Committee or the CEO, in
the case of an Option granted to an Employee or Consultant.
11. NONTRANSFERABILITY
Options, Rights, Performance Units and Incentive Shares granted or awarded
under the Plan shall not be transferable otherwise than (i) by will or the laws
of descent and distribution, or (ii) except in the case of an Incentive Stock
Option, pursuant to a qualified domestic relations order as defined in
Section 414(p) of the Code, and an Option, Right or Performance Unit may be
exercised during the Optionee's lifetime only by the Optionee or, in the event
of the Optionee's legal disability, by his or her legal representative. A
Related Right or Related Performance Unit is transferable only when the Related
Option is transferable and only with the Related Option and under the same
conditions.
12. RESTRICTED STOCK AWARDS
12.1 The Committee is hereby authorized to award shares of Restricted Stock
to Covered Employees, Key Employees and Consultant-Directors, and the CEO is
hereby authorized to award shares of Restricted Stock to Employees and
Consultants.
12.2 Restricted Stock awards under the Plan shall consist of Shares that
are restricted against transfer, subject to forfeiture, and subject to such
other terms and
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conditions intended to further the purposes of the Plan as may be determined by
the Committee or the CEO, in the case of Restricted Stock awarded to an Employee
or Consultant.
12.3 Restricted Stock awards shall be evidenced by Agreements containing
provisions setting forth the terms and conditions governing such awards. Each
such Agreement shall contain the following:
(i) prohibitions against the sale, assignment, transfer, exchange,
pledge, hypothecation, or other encumbrance of (A) the Shares awarded as
Restricted Stock under the Plan, (B) the right to vote the Shares, or (C) the
right to receive dividends thereon in each case during the restriction period
applicable to the Shares; provided, however, that the Grantee shall have all the
other rights of a shareholder including, but not limited to, the right to
receive dividends and the right to vote the Shares;
(ii) at least one term, condition or restriction constituting a
"substantial risk of forfeiture" as defined in Section 83(c) of the Code;
(iii) such other terms, conditions and restrictions as the Committee
or the CEO, in the case of Restricted Stock awarded to Employees or Consultants,
in its or his discretion may specify (including, without limitation, provisions
creating additional substantial risks of forfeiture);
(iv) a requirement that each certificate representing shares of
Restricted Stock shall be deposited with the Company, or its designee, and shall
bear the following legend:
"This certificate and the shares of stock represented hereby
are subject to the terms and conditions (including the risks
of forfeiture and restrictions against transfer) contained
in the Maxim Pharmaceuticals, Inc. 1993 Long-Term
Incentive Plan and an Agreement entered into between the
registered owner and Maxim Pharmaceuticals, Inc. Release
from such terms and conditions shall be made only in
accordance with the provisions of the Plan and the
Agreement, a copy of each of which is on file in the office
of the Secretary of Maxim Pharmaceuticals, Inc."
(v) the applicable period or periods of any terms, conditions or
restrictions applicable to the Restricted Stock, provided, however, that the
Committee or the CEO, in the case of Restricted Stock awarded to an Employee or
Consultant, in its or his discretion may accelerate the expiration of the
applicable restriction period with respect to any part or all of the Shares
awarded to a Grantee; and
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(vi) the terms and conditions upon which any restrictions upon shares
of Restricted Stock awarded under the Plan shall lapse and new certificates free
of the foregoing legend shall be issued to the Grantee or his or her legal
representative.
12.4 The Committee or the CEO, in the case of Restricted Stock awarded to
an Employee or Consultant, may include in an Agreement a requirement that in the
event of a Grantee's termination of employment or other service with the Company
for any reason prior to the lapse of restrictions, all shares of Restricted
Stock shall be forfeited by the Grantee to the Company without payment of any
consideration by the Company, and neither the Grantee nor any successors, heirs,
assigns or personal representatives of the Grantee shall thereafter have any
further rights or interest in the Shares or certificates.
13. INCENTIVE SHARE AWARDS
13.1 The Committee is hereby authorized to award Incentive Shares to
Covered Employees, Key Employees and Consultant-Directors, and the CEO is hereby
authorized to award Incentive Shares to Employees and Consultants.
13.2 Incentive Shares shall be Shares that shall be issued at such times,
subject to achievement of such performance or other goals and on such other
terms and conditions as the Committee or the CEO, in the case of Incentive
Shares awarded to an Employee or Consultant, shall deem appropriate and specify
in the Agreement relating thereto.
14. CAPITAL ADJUSTMENTS
The number of Shares subject to each outstanding Option, Right or
Performance Unit or Restricted Stock or Incentive Share award and the aggregate
number of shares for which grants or awards thereafter may be made automatically
shall be adjusted proportionately in the event of a stock split or stock
dividend of or with respect to the Common Stock, and the number and class of
Shares subject to each outstanding Option, Right or Performance Unit or
Restricted Stock or Incentive Share award, the Option Price and the aggregate
number and class of shares for which grants or awards thereafter may be made
shall be subject to such adjustment, if any, as the Committee in its sole
discretion deems appropriate to reflect such events as adoption of stock rights
plans, recapitalizations, mergers, consolidations or reorganizations of or by
the Company.
15. TERMINATION OR AMENDMENT
The Board shall have the power to terminate the Plan and to amend it in any
respect, provided that, after the Plan has been approved by the shareholders of
the Company, the Board may not, without the approval of the shareholders of the
Company if such approval is then required by applicable law or in order for the
Plan to continue to satisfy the requirements of Rule 16b-3 under the Exchange
Act, amend the Plan so as to
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increase materially the number of Shares that may be issued under the Plan
(except as provided in Article 14), to modify materially the requirements as to
eligibility for participation in the Plan, to change the class of persons
eligible to receive Incentive Stock Options, or to increase materially the
benefits accruing to participants under the Plan. The Board may in its sole
discretion submit any other amendment to the Plan for shareholder approval,
including, but not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations promulgated
thereunder regarding the exclusion of performance-based compensation from the
limit on corporate deductibility of compensation paid to Covered Employees. No
termination or amendment of the Plan shall, without his or her consent,
adversely affect the rights or obligations of any Optionee or Grantee.
16. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS, RIGHTS, PERFORMANCE UNITS,
RESTRICTED STOCK AND INCENTIVE SHARES
Subject to the terms and conditions and within the limitations of the Plan,
the Committee or the CEO, in the case of a grant or award to an Employee or
Consultant, may modify, extend or renew outstanding Options, Rights and
Performance Units, or accept the surrender of outstanding options, rights and or
performance units (to the extent not theretofore exercised) granted under the
Plan or under any other plan of the Company or a company or similar entity
acquired by the Company or a Subsidiary, and authorize the granting of new
Options, Rights and Performance Units pursuant to the Plan in substitution
therefor (to the extent not theretofore exercised), and the substituted Options
may specify a lower exercise price than the surrendered options, and the
substituted Options, Rights and Performance Units may specify a longer term than
the surrendered options, rights and performance units or have any other
provisions that are authorized by the Plan. Subject to the terms and conditions
and within the limitations of the Plan, the Committee or the CEO, in the case of
a grant or award to an Employee or Consultant, may modify the terms of any
outstanding Agreement providing for awards of Restricted Stock or Incentive
Shares. Notwithstanding the foregoing, however, no modification of an Option or
Right granted under the Plan, or an award of Restricted Stock or Incentive
Shares, shall, without the consent of the Optionee or Grantee, alter or impair
any of the Optionee's or Grantee's rights or obligations.
17. EFFECTIVENESS OF THE PLAN
The Plan and any amendments requiring shareholder approval pursuant to
Article 15 are subject to approval by vote of the shareholders of the Company
within 12 months after their adoption by the Board. Subject to that approval,
the Plan and any amendments are effective on the date on which they are adopted
by the Board. Options, Rights, Performance Units, Restricted Stock and
Incentive Shares may be granted or awarded prior to shareholder approval of the
Plan or amendments, but each such Option, Right,
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Performance Unit, Restricted Stock or Incentive Share grant or award shall be
subject to the approval of the Plan or amendments by the shareholders. Except
to the extent required to satisfy the requirements of Rule 16b-3 under the
Exchange Act, the date on which any Option, Right, Performance Unit, Restricted
Stock or Incentive Shares granted or awarded prior to shareholder approval of
the Plan or amendment is granted or awarded shall be the Date of Grant for all
purposes as if the Option, Right, Performance Units, Restricted Stock or
Incentive Shares had not been subject to approval. No Option, Right or
Performance Unit may be exercised prior to such shareholder approval, and any
Restricted Stock or Incentive Shares awarded shall be forfeited if such
shareholder approval is not obtained.
18. TERM OF THE PLAN
Unless sooner terminated by the Board pursuant to Article 15, the Plan
shall terminate on September 30, 2003 and no Options, Rights, Performance Units,
Restricted Stock or Incentive Shares may be granted or awarded after
termination. The termination shall not affect the validity of any Option,
Right, Performance Unit, Restricted Stock or Incentive Shares outstanding on the
date of termination.
19. INDEMNIFICATION OF COMMITTEE AND CEO
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee and the
CEO, in the case of a grant or award to an Employee or Consultant, shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees, actually and reasonably incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Option, Right, Performance Unit,
Restricted Stock or Incentive Shares granted or awarded hereunder, and against
all amounts reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, if such
members or the CEO, as the case may be, acted in good faith and in a manner
which they believed to be in, and not opposed to, the best interests of the
Company.
20. GENERAL PROVISIONS
20.1 The establishment of the Plan shall not confer upon any Director,
Employee, Covered Employee, Key Employee, Consultant-Director or Consultant any
legal or equitable right against the Company, any Subsidiary, the Committee or
the CEO, except as expressly provided in the Plan.
20.2 The Plan does not constitute inducement or consideration for the
employment of any Employee, Covered Employee, or Key Employee, or the service of
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any Director, Consultant-Director or Consultant, nor is it a contract between
the Company or a Subsidiary and any Director, Employee, Covered Employee, Key
Employee, Consultant-Director or Consultant. Participation in the Plan shall
not give a Director, Employee, Covered Employee, Key Employee,
Consultant-Director or Consultant any right to be retained in the service of the
Company or a Subsidiary.
20.3 The Company and a Subsidiary may assume options, warrants, or rights
to purchase stock issued or granted by other companies whose stock or assets
shall be acquired by the Company or a Subsidiary, or which shall be merged into
or consolidated with the Company or a Subsidiary. Neither the adoption of this
Plan, nor its submission to the shareholders, shall be taken to impose any
limitations on the powers of the Company or its affiliates to issue, grant, or
assume options, warrants, rights, performance units, restricted stock or
incentive shares, otherwise than under this Plan, or to adopt other stock
option, stock appreciation right, performance unit, restricted stock or
incentive share plans or to impose any requirement of shareholder approval upon
the same.
20.4 The interests of any Director, Employee, Covered Employee, Key
Employee, Consultant-Director or Consultant under the Plan are not subject to
the claims of creditors and may not, in any way, be assigned, alienated or
encumbered except as provided in Article 11.
20.5 The Plan shall be governed, construed and administered in accordance
with the laws of Delaware and the intention of the Company that Incentive Stock
Options granted under the Plan qualify as such under Section 422 of the Code.
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MAXIM PHARMACEUTICALS, INC.
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 20, 1998
The undersigned hereby (i) acknowledge(s) receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement dated January 12, 1998, relating
to the Annual Meeting of Stockholders of MAXIM PHARMACEUTICALS, INC. (the
"Company") to be held February 20, 1998 and (ii) appoints Larry G. Stambaugh
and Dale A. Sander as proxies, with full power of substitution, and
authorizes them, or either of them, to vote all shares of Common Stock of the
Company standing in the name of the undersigned at said meeting or any
postponement, continuation and adjournment thereof, with all powers that the
undersigned would possess if personally present, upon the matters specified
below and upon such other matters as may be properly brought before the
meeting, conferring discretionary authority upon such proxies as to such
other matters. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR
PROPOSALS 2 AND 3.
STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE IN PERSON EVEN THOUGH THEY HAVE
PREVIOUSLY MAILED THIS PROXY CARD.
MANAGEMENT RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED IN PROPOSAL 1
AND FOR PROPOSALS 2 AND 3.
(Continued on reverse side)
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(Continued from reverse side)
1. To elect two directors to hold office until the 2001 Annual Meeting of
Stockholders.
Per-Olof Martensson
Larry G. Stambaugh
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed
below) above.
To withhold authority to vote for any nominee write such nominee's name
below:
-------------------------------------------------------------------------
2. To approve the Company's 1993 Long-Term Incentive Plan, as amended, to
increase the aggregate number of shares authorized for issuance thereunder
from a total of 1,000,000 shares to 1,300,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
3. To ratify the Board of Directors' initial selection of KPMG Peat Marwick
LLP as the Company's independent public accountants for the fiscal year
ended September 30, 1998.
/ / FOR / / AGAINST / / ABSTAIN
Please check this box if you plan to attend the meeting. / /
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as executor,
administrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
President or other authorized officer. If
a partnership, please sign in partnership
name by authorized person.
------------------------------------------
------------------------------------------
Signature(s) Date
Please mark, date, sign and mail this proxy card in the envelope provided. No
postage is required for domestic mailing.
2
